German economy returns to growth

The German economy, Europe’s biggest, returned to modest growth of 0.1% in the third quarter – avoiding a technical recession after contracting slightly in the previous three-month period, official data showed today.

The quarter-on-quarter growth figure for the July-September period was in line with economists’ expectations. It followed a contraction of 0.1% in the April-June period, a figure that was revised from the initial reading of 0.2%.

Household spending and exports supported the economy in the third quarter, but investment in machinery and construction declined, the Federal Statistical Office said.

Third-quarter gross domestic product figures for the full 18-nation eurozone are due later today.

Carsten Brzeski, an economist at ING-DiBa, said that “different problems in several important trading partner countries like China, France and Italy combined with uncertainty stemming from the ongoing Ukrainian crisis are the most obvious drivers behind Germany’s current growth problems.”

He said that “the German economy is nowhere near any abyss”, with low unemployment and very competitive industry, but a trend of underwhelming growth over recent quarters also signals that it “could use a new reform impulse rather sooner than later”.

Earlier this week, the government’s independent panel of economic advisers forecast growth of just 1% next year following a 1.2% expansion in 2014. It pointed to “geopolitical risks” such as the Ukraine crisis and weak eurozone growth but also criticised government policies such as plans to introduce a minimum wage next year.

Chancellor Angela Merkel’s government has acknowledged the need for higher investment, but is determined to balance the budget next year and has stressed that its priority is to stimulate private investment rather than adding to public debt. However, the government recently announced plans to invest an extra 10 billion euros (£8 billion) in infrastructure between 2016 and 2018.